5 Common Questions and Answers About Blockchain Technology
Frequent Questions About Blockchain Technology
- What is blockchain technology?
- What is the relationship between blockchain technology and cryptocurrency?
- Are there actual blocks involved?
- Is the blockchain technology limited to cryptocurrency?
- What are the regulations for blockchain systems?
As the world entered an era of cryptocurrency, blockchain systems became one of the hottest topics in the market. And rightly so. After all, they are responsible for major trends in the global industries including decentralization, privacy, and increased efficiency.
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1. What is blockchain technology?
Invented by an anonymous entity from China, Satoshi Nakamoto, blockchain first came to light after Bitcoin became popular. It is a digital network where information is distributed and not copied. Transactions are verified by independent parties who solve puzzles in order to move those transactions into blocks. Once the blocks are completed, the transactions get approved and become a part of the chain. Hence the name that combines the words “block” and “chain”. In basic terms, the invention of blockchain marks the beginning of a new era where internet is used to transact without limits often set by the financial institutions.
2. What is the relationship between blockchain technology and cryptocurrency?
The easiest way to explain the relationship between cryptocurrencies and blockchain is to give a real-world example. For instance, they are related to one another just like Uber is related to its drivers or the NFL is related to its athletes. Meaning, cryptocurrencies rely on blockchain systems for existence. In fact, Bitcoin, Ethereum, Ripple, Dash, and countless other trend-setting innovators would never come around absent this technology. This is because blockchain facilitates everything that cryptocurrencies offer. It is the network used to provide decentralization and privacy that crypto assets became famous for.
3. Are there actual blocks involved?
Yes and no. In literal terms, there are no actual blocks involved. This is, after all, a digital system that takes place online. Nevertheless, remember how transactions are grouped into blocks that are added to the chain? Well, this is where one could make an argument that there are certain types of blocks involved. Take Bitcoin, which is the poster child for the entire movement of cryptocurrencies, for example. It operates via one-megabyte blocks that are used to fit transactions which the miners verify. Interestingly enough, even the blocks caused many vicious debates as users continue to fight for increased sizes.
4. Is the blockchain technology limited to cryptocurrency?
Not exactly. Even though there would be no mention of this technology without the unprecedented growth of cryptocurrency, it is not limited to this market only. On the contrary, the idea of fitting verification procedures into blocks that are distributed on a public ledger for each of the users can be applied universally. For instance, healthcare professionals could use it to share patient files all over the world while ensuring that only specific doctors have access. Similarly, many purposes for this network can be tied to the military and government-based operations.
5. What are the regulations for blockchain systems?
This is one of the most myth-like questions that pertain to the blockchain. The reason why is the fact that blockchain is a type of technology. So, asking if there is any regulation around it is like asking if there are laws focused on 3-D printing. In translation, there are no laws advocating any type of technology. Where the regulations come in, however, is cryptocurrencies. Therefore, it is not surprising that many people mistake the government policies surrounding crypto-based assets for laws that regulate blockchain. Still, it is important to understand that blockchain itself is not subjected to regulation since it is a form of technology, not an investment network.
Other questions that are often connected to the blockchain-based systems revolve around more in-depth topics that vary. So, understanding the previous five common questions about blockchain will certainly set one up for a good start.
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